Newbie from Northern Virginia

[Mayank S.]

I am newbie in real estate investing and BP. Looking to get started on this journey and expecting to learn and gain valuable insight from such a huge experienced REI community on BP. I recently attended 3 day seminar on Fortune Builders in DC and that inspired me to plunge and learn more about REI. I didn't sign up for their mentor program which is way too expensive.

Hoping to learn more and more from folks in BP. BTW any way to find local REI community in Northern VA. Please share some insight.

[Roger Lin]

Mayank,

I can't say that I am very established. We bought our first property at the end of 2003. I had just finished school and had gotten married a few months before that. Wife had a great job, I was unemployed. Since then, I saw that same house surge in value to almost twice what we paid for in 2006, then dropped to the price we bought it about 2009. Now, it's about the level of 2005 again. Those first few years got me to expect property values to double every 3 years, then get cut in half in the next 3 years, then it took 6 more years to come back. 

I have to say, I learned much more in those second two years than any time. I was lucky enough to start my investment career in 2007, just when the bottom was about to drop out. I didn't take advantage of a lot of opportunities but I sure watched the market a lot and occasionally made some investments.

The atomsphere today feels like 2005 to me. There is optimism starting to gain momentum, which is not a bad thing but I think people need to be introspective and know that there is a lot that they don't know and proceed cautiously. I am not able to give you concrete advice without knowing more about you and your financial situation. However, here are some general information that I can give you.

Grow your cash pile. For example, I might consider other financing options other than a 20 year fixed mortgage. What you have is very safe and you are growing equity that you cannot access readily. With a fixed mortgage, your required monthly cash out-lay is high because of the regular amortization. I generally like line of credit type products better. It does require more self-discipline. However, when you have a LOC, your only required payment is typically interest-only. I recommend you set aside funds for taxes and insurance just like your bank does for you. In addition, while you are still looking for a specific investment target, I would pay as much principal down as possible without negatively affecting your living standard. I look at paying off a loan as a really good savings account. Because by prepaying, you are essentially "earning" the interest (actually it's better, you don't pay taxes on it). When you do this, the line of credit accessible to you grows. This eventually will grow into a large pile of cash that you can draw upon readily when you find the right opportunity. Also, the best part is, you ONLY pay interest on what you owe.

Regarding finding that next property, I think figuring out an investment strategy that suits your personality, available time and energy and skills will be very important. I think that takes a lot of tirekicking, meeting people and networking. I've tried buy & hold, flipping, new construction, hard money lending, commercial... in the last 7 years. Not sure where this journey will eventually lead me but it sure is never boring. Or if it becomes boring, there's always something else in real estate that you can do. Happy investing!